Case: Cancellation-of-Indebtedness Income Was Recognized in Proper Tax Year (2d Cir.)

Taxpayers’ income from discharge of mortgage debt was properly recognized in the 2015 tax year, the United States Court of Appeals for the Second Circuit held, affirming the district court’s grant of summary judgment for the government. Taxpayers, a married couple, reported cancellation-of-indebtedness income on their 2015 joint tax return resulting from the discharge of one spouse’s mortgage debt on a property. They later requested a refund from the IRS and brought a refund suit against the government, contending the income was taxable in 2017 rather than 2015. The court held that the debt discharge occurred in 2015 when Taxpayer ...